The cost of insuring Dutch market research firm VNU's debt against a default soared on Monday, after it revised the structure of the discount notes backing its leveraged buyout.
VNU will issue a 200 million euro ($252 million) senior discount note via VNU NV and $600 million equivalent of senior subordinated discount notes via Nielsen Finance, a banker familiar with the sale said.
The original plan was to issue $835 million equivalent of senior subordinated discount notes.
The move addresses concerns that credit default swap contracts on VNU would have no underlying debt that would be deliverable if the contracts were triggered, the banker said.
The cost of insuring against a default by VNU rose as it became clear that the contracts would have deliverable debt as notes will be issued directly by VNU NV.
Five-year credit default swaps on VNU rose 70 basis points to 495 basis points by 1420 GMT, a trader in London said.
Elsewhere, five-year credit default swaps on Fiat were 25 basis points tighter, bid at 180 basis points, a second trader said, after Fiat reported better than expected second quarter results.
Fiat said its trading profit rose 83.1 percent in the second quarter on higher sales as its key automotive business posted its third quarterly profit in a row.
In telecoms, the cost of insuring Portugal Telecom's debt against a default rose, after La Vanguardia newspaper reported Spanish telecoms group Telefonica plans to sign up its 9.9 percent stake in Portugal Telecom to a take-over offer from Sonaecom.
"It went wider this morning after Telefonica said it would divest its stake, which is not something you're going to do if you're planning to be a white knight," a third trader said.
Later on Monday, a spokeswoman for Portugal's competition authority said it could not set an exact date for when it will complete its consideration of Sonaecom's 11.1 billion euro take-over bid for PT.
Markets are eagerly awaiting the decision of the competition agency on Portugal's biggest ever take-over. The timing of the decision could have an impact on whether there is another, competing bid for PT.
Five-year credit default swaps on Portugal Telecom rose 15 basis points, to be bid at 170 basis points, the trader said.
In cash bonds, the FTSE Euro Corporate Bond Index showed investment-grade corporate bonds in euros yielding an average 53.8 basis points more than similarly-dated government bonds at 1449 GMT, 0.2 basis points less on the day.
"Earnings data will probably be of higher importance this week than macro data," Dresdner Kleinwort analysts wrote in a note to clients.
"With the indices trading in the upper half of the trading range we have in mind (240-290bp for the Crossover index), we think they can remain around the current level in the short term. We see few strong impulses to drive them far from here."
The iTraxx Crossover index, made up of mostly "junk" rated credits, was three basis points tighter, bid at 277 basis points, an index trader in London said.
Travelport, the former travel distribution services unit of Cendant Corp that has been bought by private equity fund Blackstone Group, plans to sell $1.4 billion of bonds in dollars and euros, a banker familiar with the deal said on Monday.
Meetings with high-yield investors are expected to kick off on Thursday, the banker said, when a meeting for potential investors in the bank debt backing the deal will also be held.
Proceeds will help finance the leveraged buyout of Travelport. Blackstone agreed to buy the unit from Cendant in June for about $4.3 billion in cash.
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